15 Feb 2019
Aussie corporate earnings season off to a mixed start
- Global markets finished higher this week, whilst the local market finished flat on mixed corporate earnings results.
- More than 70% of US companies have posted better than expected profits, with 4th quarter earnings growth now estimated at 16.5% which is up slightly from the beginning of the year.
- However, earnings for the 1st quarter 2019 are now expected to be weaker than previously expected.
- In local stock news, JB Hi-Fi shares rose after the retailer posted a 5.5% rise in 1st half profits against rather bearish expectations for the retail sector. The company did flag a slowdown in sales momentum in January.
- A company part-owned by Spark Infrastructure has lost a court case against the ATO which may have an industry wide impact on utilities for tax treatments in the future. The result may see the company start paying tax earlier than expected.
- Both Macquarie and CSL reported strong results with Macquarie guiding to a 15% lift in profits and CSL reporting earnings in line with expectations and guiding to net profit after tax to be in the upper end of the range they previously provided. The market was disappointed with CSL, wanting an increase to guidance.
- On the flip side, Tabcorp, Telstra, and Carsales.com shares fell as their companies’ earnings reports disappointed investors.
- US consumer price inflation was unchanged for the 3rd straight month in January leading to an annualised rate of 1.6%. UK inflation fell, coming below the Bank of England’s 2% target.
- A US central bank official said the economy was slowing down to a more sustainable pace which may actually help subvert a recession given potential over-heating in the economy. Another bank official was worried that policy settings were too restrictive leading to a bigger miss on their inflation target.
- US central bank chair Jerome Powell stated the bank didn’t feel that the probability of a recession is elevated. We’d have to agree with him, even in light of all the negativity flying around.
- US small business optimism fell to its lowest level since 2016 with the government shutdown being cited as the main cause for diminishing confidence.
- PM Morrison and the Coalition suffered an embarrassing defeat where they were outvoted on the floor of the house in relation to legislation regarding asylum seekers. The loss could be seen as proxy vote of no-confidence in the Government. On the flip-side, opposition leader Bill Shorten and the Labor party took on plenty of risk in endorsing the bill given their already significant lead in the polls.
- Trade talks between senior US and Chinese officials continued this week with both sides citing plenty of work to be done. There is some rising speculation that the timeline might me too tight for a trade deal, with an extension of the March 1 likely. President Trump indicated he’d be willing to allow an extension if needed.
- US congressional leaders are attempting to reach an agreement on border security funding in a bid to avert another government shutdown. Funding for the Department of Homeland Security and other agencies is due to expire if agreement is not reached this week.
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